CH82284 - Penalties for Inaccuracies: Calculating the penalty: Potential lost revenue Corporation Tax Group Relief or S458 CTA10: Example of PLR where Group Relief reduced due to an overstated loss
You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.
A, B and C are a group of companies. Their returned results are
|Company A profits||50,000||less Group Relief 50,000|
|Company B loss||(75,000)|
|Company C profits||60,000||less Group Relief 25,000|
In this example Company B’s return is carelessly inaccurate. Company B’s true loss is £40,000, so the Group Relief surrenders must be reduced.
Company B must, and does, withdraw its surrenders of £50,000 to Company A and £25,000 to Company C. Company B then surrenders £40,000 to Company A.
The ‘ignore Group Relief’ rule does not prevent a penalty being charged on the inaccurate claims for relief.
The Group Relief claims by both Company A and Company C are inaccurate. It is only necessary for the claims originally made by Company A and Company C to have been inaccurate, not carelessly inaccurate.
Assuming liability at the small companies’ rate, the additional tax due and payable as a result of putting right the inaccuracy is as follows.
|Less Group Relief||40,000||50,000||-10,000|
|Profits chargeable to CT||10,000||0||10,000|
|Tax at small companies’ rate (say 21%)||2,100||2,100|
|Less Group Relief||0||25,000||-25,000|
|Profits chargeable to CT||60,000||35,000||25,000|
|Tax at small companies’ rate (say 21%)||12,600||7,350||5,250|
The PLR for Company B’s penalty is calculated by reference to the additional amount of tax payable by Companies A and C, taking into account the reduced amount of Group Relief available, as follows.
|Additional tax payable by Company A||2,100|
|Additional tax payable by Company C||5,250|
|Total PLR for Company B||7,350|